Italy

Banca Popolare di Milano (BPM) is set to wrap up its investor roadshow at the beginning of this week against a backdrop of declining bank stocks and concerns over rising inflation. One syndicate manager said that conditions may have reached the stage where the covered bond market cannot be said to be merely taking a breather, but has instead suffered a knock-out blow.

Banca Popolare di Milano hopes to lay the foundations for regular visits to the covered bond market with the launch of the first obbligazioni bancarie garantite soon after its roadshow finishes next Monday. The Cover spoke to the issuer and its arrangers about their plans.

Unione di Banche Italiane (UBI Banca) has mandated Barclays Capital, Deutsche Bank, Natixis and Société Générale for its debut covered bond. The group will be roadshowing from 30 June to 7 July.

Banca Popolare di Milano could launch the first issue under the Italian covered bond framework this month, with its roadshow due to kick off late next week. The bank has also finalised its choice of lead managers.

Banca Carige is setting up a Eu5bn covered bond programme that it plans to finalise by the end of September this year, according to an official at the bank. It intends to launch a subordinated debt deal first to improve capital ratios and give itself more freedom to issue covered bonds, although market participants suggested this was unlikely to be the beginning of a trend.

Intesa Sanpaolo has taken a step towards covered bond issuance, signing a contract to transfer Eu8bn of residential mortgages into a special purpose vehicle to issue MBS that are expected to be used as collateral for covered bonds this year.

The quest for an issuer to re-open the market continues, with Dexia Municipal Agency believed to have found limited enthusiasm for a new deal after pre-sounding in difficult conditions. Meanwhile, Italy’s Banca Popolare di Milano (BPM) has attempted to push itself to the front of the Italian bond queue following remarks by an official at the bank.

When The Cover looked at analysts’ forecasts for covered bond supply in 2008, the new entrant with the potential for the most supply was Italy, with one bank even expecting it to be the fifth biggest jurisdiction this year.

Fitch Ratings has delivered its verdict on the legal framework for Italian covered bonds (obbligazioni bancarie garantite) in a research report published today. The rating agency is satisfied by the cover asset segregation in one of the two issuance frameworks, with further information awaited on the second. However, there are concerns at the lack of definition of the Bank of Italy’s (BoI) role as regulator.

Fitch Ratings has given a positive review of the performance of major Italian banks in the first half of 2007 and, most importantly ahead of their entry into the covered bond market in 2008, a clean bill of health to their mortgage businesses.

Does Italy have the most potential of all the new European covered bond jurisdictions? Many think so, basing their optimism on the belief that the country could produce between Eu20bn and Eu40bn of issuance a year. That would put it on a par with France and the UK. But where should the issuance be priced: on a par with Spain or the UK? Philip Moore reports.